MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is widely expected to bring down its key policy rate by 25 basis points (bps) at its upcoming Monetary Board meeting on Thursday, according to a poll of analysts conducted last week. UnionBank chief economist Ruben Carlo Asuncion said he sees another 25-bp rate cut from the BSP, which would bring the benchmark rate to 5.75 percent from the current level of six percent.
“Inflation staying within the BSP’s target is one of the main reasons why we think that the BSP will consider a cut. If the US Federal Reserve does deliver its own 25 bps, we believe that the BSP will all the more consider cutting key interest rates,” he said.
Headline inflation quickened to 2.5 percent in November from 2.3 percent in October, marking its second straight month of increase. This brought average inflation for January to November to 3.2 percent.
In a commentary, BPI lead economist Jun Neri said while a pause is possible this week, it is more likely for the BSP to cut rates by 25 bps given recent economic data and external developments.
“The inflation outlook for 2025 supports the case for a rate cut,” Neri said. “Despite consumer prices rising at a faster pace in November, inflation remains well within the target.”
Neri also noted that the peso’s relatively stable performance against the dollar over the past two weeks has eased concerns about the impact of exchange rate fluctuations on prices.
With markets assigning a 96-percent probability of a 25-bp rate cut by the US Fed on Dec. 18, local monetary authorities may be less worried about reducing rates prematurely.
Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco said the Monetary Board would cut rates further by 25 bps on Dec. 19 to support weak gross domestic product (GDP) in the third quarter.
The Philippine economy grew by only 5.2 percent in the third quarter, slower than the 6.4 percent in the previous quarter and six percent a year ago. From January to September, GDP growth averaged 5.8 percent.
Maria Kaila Balite and Ezra Vidar, research analysts at Metrobank, said the US Fed is also expected to cut policy rates by 25 bps at its Dec. 17-18 meeting.
“Monetary authorities in the US and the Philippines are expected to end the year with another rate cut, sustaining their policy easing cycle amid benign consumer prices,” they said.
Philippine economic growth is also projected to settle below the government’s revised target of six to 6.5 percent this year, giving the BSP room to continue its policy easing to stimulate consumption and investments.
“We forecast the BSP to cut the reverse repurchase rate by 25 bps to 5.75 percent. We also project BSP to carry out three rate cuts in 2025,” Balite and Vidar said.
Sarah Tan, an economist from Moody’s Analytics, said a weak peso might limit the BSP’s ability to extend its easing cycle. However, policy easing remains likely to bolster private consumption, which is a key driver of economic growth.
“Indeed, the coming year will be clouded by uncertainties around global trade. The prospect of tariffs from the US looms large, and the pace of global interest rate normalization is likely to slow,” she said.
“We expect monetary policy easing to continue in 2025, but at a cautious pace as the BSP balances inflation expectations and the strength of the peso,” Tan added.
BPI’s Neri also said the central bank may cut policy rates further next year. But risks in the global economy cloud the outlook.
“If US president-elect Donald Trump delivers on his campaign promises of massive tariffs and deportation, higher US inflation could translate to slower US rate cuts, if not outright policy reversals,” he said.
“In an adverse scenario, global central banks could pivot to monetary tightening to contain the impact on their own inflation rates.”